“Qui vivra verra”

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(Bloomberg) — Treasuries pared gains and the curve steepened late in the U.S. afternoon session following a soft 30-year auction and large block trade in ultra-long bond futures; curve still flatter on the day following initial reaction to Thursday’s U.S. midterm elections. USTs showed muted reaction to news of Attorney General Jeff Sessions resignation.

  • Just ahead of cash settlement at 3pm ET, 6,031 WNZ8 block trade printed at 148-24, which pushed 5s30s above 36bp level as long end weighed; curve ended flatter by 2.2bp on the day after having dropped as low as 34.3bp before finding support at 200- DMA
  • Yields across front end were cheaper by up to 1.6bp, flattening 2s10s by 2.7bp; 10-year yields ended around 3.22%, richer by 1.1bp
  • The 30-year bond auction was notably weak, which triggered a sharp steepening move as results were released; the sale tailed by 2.3bp, while bid-to-cover was lowest since 2009; directs were soft at just 2.9%
    • Initial long-end weakness was faded via 4,975 USZ8 block buyer
  • Eurodollars were steady, with reds lower by up to 1.5bp while rest of the strip was marginally weaker; option flows included large buyer of upside via 2EM9 97.75 calls over U.S. morning session
  • Treasury options included 42k TYG9 118.5 calls bought at 33 ticks, targeting ~3.11% yield ahead of Jan. 25 expiry

(Bloomberg) — FNCL CC spread to 5/10-year blend (+95) closed 2bp tighter; UST 10Y yield closed 3bp higher at 3.23%.

  • All levels/prices/yields as of close, according to Bloomberg data
  • Primary/Secondary spread ~1bp tighter at +73bp; trailing 3- mo. high/low close: +89bp (Oct. 2)/+71bp (Nov. 2)
  • 10Y yield ~3bp higher at 3.23%; trailing 3-mo. high/low close: 3.23% (Oct. 5)/2.81% (Aug. 24)
  • FN30 CC yield ~1bp higher at 4.09%; trailing 3-mo. high/low close: 4.09% (Nov. 6)/3.56% (Aug. 20)
  • FNCL 3s +63bp to 5/10-yr blend, tighter by ~3bp, 90-DMA +62bp
  • FNCL 4s +91bp to 5/10-yr blend, tighter by ~2bp, 90-DMA +92bp
  • FNCI3/FNCL3.5 unchanged
  • Volatility (1M10Y) ~1.0bp lower at 63.1bp; trailing 3-mo. high/low close: 65.1bp (Oct. 30)/49.4bp (Oct. 1)
  • 10Y swap spread ~0.4bp tighter at 5.7bp; trailing 3-mo. high/low close: 7.8bp (Aug. 24)/3.8bp (Oct. 5)
  • 2/10 slope ~1bp wider at +30bp; trailing 3-mo. high/low close: +34bp (Oct. 5)/+19bp (Aug. 24)

 

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Downside protection in Yuan (CNH) options diminishes since President Trump’s phone call with Xi of China.

 

 

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(Bloomberg) — Coffee futures rebounded from a two-day drop amid heightened volatility as traders weigh ample supplies and currency swings. Futures rose in both New York and London as volatility held near the highest in at least a year.

While prices have climbed since September as a stronger real curbed the appeal of exports from major grower Brazil, supplies remain ample there as well as in Vietnam. Wednesday’s gains also came as a weaker dollar helped push most commodities higher.

Drivers

Global demand for robusta coffee is seen climbing to record this season, according to an RCMA Group forecast Heavy rains may delay harvesting in Indonesia this week, Radiant Solutions said Brazil’s real held above a three-week low, while the Bloomberg Dollar Spot Index fell as much as 0.6%

Prices

Arabica  for December +1.2% to $1.1455/lb in New York  Prices dropped 5.7% in the previous two days Robusta  for January +0.9% at $1,684/ton Slid 3.5% in the previous two days Arabica’s 30-day historical volatility is near a two-year high, while a measure for robusta is near the highest in a year

Market Talk

Coffee futures had been under pressure amid concerns about big crops and as the dollar tried to rally, but the greenback couldn’t hold,  Jack Scoville , vice president at Price Futures Group in Chicago, said in a report. “Some problems with too much rain have been noted in Central America.”

Other soft commodities

Raw Sugar  for March +0.6%;

White Sugar for March +0.3%

Cocoa for March +0.3% to $2,394/ton in New York Reaches highest for a most-active contract since July Beans decline in London Cocoa Market  to Be Balanced as Demand Rises.

 


-R.W.N II, yours in 322.

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